What the New Prepaid Debit Card Rules Say


The Consumer Financial Protection Bureau on Wednesday released new federal rules that will require issuers of prepaid accounts to provide more security and clarity about fees and services.

Federal consumer protections on checking accounts and credit cards under two U.S. laws will be extended and tailored to users of prepaid debit cards, starting Oct. 1, 2017. Here’s what will be applicable:

For all prepaid debit cards

Many financially disadvantaged Americans, who can’t open bank accounts due to negative banking history, use prepaid debit cards as a substitute for checking accounts. The CFPB expects the total amount loaded onto prepaid cards to nearly double from about $65 billion in 2012 to $112 billion by 2018.

The new rules aim to treat the cards more like checking accounts. They include:

  • More clarity on products before purchase. A prepaid card issuer must provide short- and long-form disclosures for its accounts so that you’ll know all the fees and any available overdraft programs while shopping for a card. Such programs let transactions, such as purchases or ATM withdrawals, go through even if your account balance drops below zero, but their fees can be expensive. The disclosures also will have to note whether an account is eligible for deposit insurance, which lets you get your preloaded money back if the prepaid company goes bankrupt. You’ll see clear disclosures on issuers’ websites as well as on the back of prepaid card packaging.
  • Free and simple ways to access account info. Prepaid issuers with cards that don’t have credit features activated won’t be required to offer periodic statements like checking accounts do, but alternatives must be provided. The company must let you access your account balance by phone, review at least 12 months of online account transaction history, and request at least 2 years’ worth of written transaction history — all for free. The issuer also must include a summary total that shows all fees charged to your account.
  • Right to dispute errors or fraudulent charges. If you inform your card issuer of an error or fraudulent charge on your account, the company usually must confirm or deny it within 10 business days, depending on the type of transaction.
  • Protections against loss or theft. Previously, prepaid card issuers offered voluntary protections that could be withheld. Under the new rules, though, you will have some guaranteed protection against unauthorized charges on lost or stolen cards. You’ll be responsible for only up to $50 of fraudulent charges provided you report the incident within two days of learning about it. After that period, the loss limit goes up.

For prepaid debit cards with credit components

Prepaid debit cards are not credit cards nor do they build a user’s credit history. However, some of them let you borrow money through features such as overdraft programs, cash advances or other credit services. The CFPB calls these products “hybrid prepaid-credit cards” and will apply the following rules:

  • 30-day wait period before overdraft option is available. Prepaid companies can’t reach out to offer you overdraft or other borrowing services until you’ve had a registered account with them for 30 days. (Registering means confirming your identity with the prepaid issuer so your name gets attached to the account.) This will let you learn more about your account before you choose to add a credit service.
  • Opt-in required for a credit feature. No card issuer can sign you up for an overdraft or other credit service without your consent. This is in line with overdraft policies for checking accounts.
  • Monthly statements. You’ll receive statements, which will include all fees, other charges and information on how to repay debt.
  • 21-day window for repaying debt before charging a fee. Companies must give you at least 21 days to pay back any debt before charging a late fee. And that fee must be “reasonable” and “proportional” to the incident, such as a late or missed payment. These rules on repayment are a bit stricter than those for overdraft policies on checking accounts, some of which can charge fees on overdrawn accounts after three business days.
  • Limits to credit-related charges. The total fees on credit features can’t go above 25% of the credit limit during the first year that credit account is opened.

These new regulations will provide prepaid account holders with more clarity, security and, hopefully, some peace of mind.

Spencer Tierney is a staff writer at NerdWallet, a personal finance website. Email: spencer@nerdwallet.com. Twitter: @SpencerNerd.

The article What the New Prepaid Debit Card Rules Say originally appeared on NerdWallet.


Reader Comments ...


Next Up in Business

Amazon raises monthly Prime membership rate
Amazon raises monthly Prime membership rate

The monthly membership fee for Amazon Prime rose Friday from $10.99 to $12.99. Company officials said the annual membership will remain at $99 dollars. Monthly customers do not get access to Amazon Video, which costs $8.99 a month. The last Prime subscription hike came in 2014, when Amazon increased its yearly membership from $79 to $99. The e-commerce...
Top tips for selling your old stuff on eBay (and actually making cash)
Top tips for selling your old stuff on eBay (and actually making cash)

Too much clutter, too little money, too many gifts you didn't like... an eBay auction is one of the simplest solutions to all three issues. If your trash might be someone else's treasure, an eBay business is simple to start and accessible to just about anyone. "It has low start-up costs and it can be started out of your home," noted the ...
After mauling, Delta tightens emotional support animal restrictions
After mauling, Delta tightens emotional support animal restrictions

In the wake of a horrific mauling of a Delta passenger by another traveler’s emotional support dog last year, Delta is tightening restrictions on emotional support animals in flight. To travel with an emotional support animal, starting March 1 Delta Air Lines will require a “confirmation of animal training” form signed by the...
Metro Atlanta, Georgia officials to present united front to nab Amazon
Metro Atlanta, Georgia officials to present united front to nab Amazon

Georgia’s full-fledged competition for Amazon’s second headquarters has entered a new and unpredictable phase now that it’s on the tech giant’s short list. But the state’s hunt for another major headquarters three years ago could provide valuable clues into its strategy for winning the project. Georgia’s long...
Kempner: Amazon, thanks for sort of picking Atlanta, but …
Kempner: Amazon, thanks for sort of picking Atlanta, but …

Amazon, it’s not that we’re ungrateful for Atlanta being one of your Top 20 choices for your second headquarters and 50,000 delicious jobs. We’ll hold off celebrating or feeling like we’ve gotten some kind of affirmation until we figure out if you just like us a good bit or really love us. Yes, we do think we are all that...
More Stories